Church Sues London Insurer in Polk County

By Mark P. Couch
Business Record
August 19, 1991

Dubuque, Iowa - The Roman Catholic Archdiocese of Dubuque has filed a lawsuit in Polk County District Court, asking the court to clarify an insurance dispute stemming from the alleged misconduct of one of the archdiocese's priests.

The lawsuit, which was filed on July 29, arises from another court battle that is taking place in U.S. District Court in Des Moines between a former Ames priest and a man who charges he was sexually abused by the priest.

In the case in U.S. District Court, Craig Perrin, who now lives in Houston, claims he was sexually abused by Robert Marcantonio, who now lives in Providence, R.I. The alleged abuse took place between 1971 and 1975, when Marcantonio was a priest at St. Cecilia's Church in Ames and a graduate student in psychology at Iowa State University. Perrin, who is now 31, was an altar boy at the church.

In his lawsuit, Perrin blames the Archdiocese of Dubuque for not properly supervising Marcantonio and for not screening seminary candidates for pedophilia, a condition in which an adult has a sexual desire for children. Perrin says he will have to undergo psychological treatment for the rest of his life.

Perrin is asking for $10 million in compensatory damages and $10 million in punitive damages from the archdiocese. Perrin's case is still pending. Earlier this year Marcantonio suffered a massive, life-threatening heart attack, according to records on file in the case.

It is Perrin's claims for damages that led to the second lawsuit. In the case in Polk County District Court, the Archdiocese of Dubuque, former Archbishop James J. Byrne and two priests, Joseph A. Sullivan and James A. Supple, want the court to determine which insurance providers are responsible for paying the damages if a claim is awarded in the Perrin case.

In the case, the Archdiocese states that Lloyd's of London, its primary liability insurer between 1971 and 1977, has agreed to submit the dispute to court.

According to the lawsuit, Lloyd's shared the risk of liability coverage for the archdiocese with several other insurers. Between 1971 and 1974, the archdiocese had an insurance policy to cover for liabilities up to $5 million.

The companies participating in the risk included Lloyd's of London, which covered 70.8 percent. Excess Insurance Co. Ltd. took 9.2 percent of the risk, while Centennial Insurance Co. picked up 10 percent of the risk. Market Insurance Co. and Midland Insurance Co. each covered 5 percent of the risk.

Under this primary policy the archdiocese was covered for liabilities above $50,000, up to a limit of $200,000 per occurrence.

Between 1974 and 1977, the archdiocese was insured under another policy for liabilities up to $5 million with Lloyd's assuming 77.93 percent of the risk. During that time, Excess had 7.07 percent. Centennial, Reserve and Midland each assumed 5 percent of the risk. This policy provided coverage for claims above $75,000, up to a limit of $250,000 per occurrence.

The archdiocese also had two other policies with Lloyd's between 1971 and 1977. These "excess" policies extended the coverage provided by Midland under the terms of the primary insurance policy. The archdiocese was insured for liabilities up to $5 million under each of those policies.

According to documents filed in the case in Polk County District Court, Lloyds has asserted that under the "first encounter" theory the insurer should not be required to pay more than the maximum coverage during the first policy period in which the first of a series of acts resulting in liability occurs.

In other words, if the U.S. District Court determines that the alleged sexual abuse of Perrin occurred over a period of several years and that the archdiocese is responsible for damages, Lloyd's argues that it should pay no more than $3.54 million of any potential judgment against the archdiocese.

Under the first encounter theory, Lloyd's would pay only the maximum coverage provided by the first policy, which insured the diocese against liability claims up to $5 million between 1971 and 1974. The share paid by Lloyd's would be $3.54 million, or 70.8 percent.

Complicating the case is the fact that three of the participating insurers have been declared insolvent and are no longer in existence: Midland, Market and Reserve.

The archdiocese wants the insurance provided by Lloyd's to cover the share of any potential claim that those insurers would have covered.

The archdiocese is further asking the court to require every other property and casualty insurer licensed to do business in Iowa to share in the cost of Perrin's potential claim. The archdiocese wants the court to declare that the Iowa Insurance Guaranty Fund should be required to cover claims that the insolvent insurers would have covered.

The Iowa Insurance Guaranty Fund is a state-mandated association that covers claims against insolvent insurers. There is a fund for life and health insurers and a fund for property and casualty insurers. Kent M. Forney, a partner with the Bradshaw, Fowler, Proctor & Fairgrave law firm and lawyer for the property and casualty insurance guaranty fund, said some 800 property and casualty companies are licensed to do business in Iowa.

For insurance companies to be approved to do business in Iowa, they must be members of the guaranty fund. Each insurance company doing business in the state must contribute to the guaranty fund, which can levy up to 2 percent of an insurance company's annual premiums.

Claims against the guaranty fund must be submitted within 30 days after the insurance company is declared insolvent, unless the board of the guaranty fund determines that unusual circumstances existed that prevented the policyholder from making a timely claim.

In this case, the three insurers were declared insolvent several years before the archdiocese became aware of Perrin's charges, the archdiocese says in its petition. The archdiocese contends that Perrin's claim is one of those unusual cases in which the guaranty fund should decide that special conditions exist.

"The claim period established for filing claims against the Iowa Insurance Guaranty Association with respect to the insolvencies of Midland, Market and Reserve insurance companies expired years before the Perrin claim was asserted, years before plaintiifs had any knowledge of such claim," the archdiocese's petition states. "Plaintiffs were therefore unable, due solely to circumstances beyond their control, to present such claims within the time prescribed by the Iowa Insurance Guaranty Association for the filing of such claims."

According to the archdiocese, the guaranty fund has refused to provide coverage for potential claims against the archdiocese in the Perrin litigation.

Forney said the fund only recently became aware of the diocese's claim and hasn't yet made a decision on whether it will provide coverage. "The only thing that we know is that we've been sued," he said. "I've still got a lot of questions."

Brendan T. Quann, the archdiocese's attorney and a lawyer with O'Connor & Thomas in Dubuque, was in trial last week and unavailable for comment.

Paul Zoss, a partner with the Adams, Howe & Zoss law firm and Perrin's attorney in the case in U.S. District Court, said he hasn't reviewed the archdiocese's lawsuit against the insurers to determine whether any action on behalf of his client in the Polk County District Court will be necessary.

Perrin's case in U.S. District Court is still in the process of discovery, which closes on March 1, 1992. The case will be ready for trial on April 1, 1992.